UPDATE: March 23, 2020: In a statement to Construction Dive, Cherry Hill Construction's attorney, C. Grainger Bowman, pushed back against allegations of "change order scheming" on the Interstate 83 Mount Rose project and said the Pennsylvania DOT (PennDOT) knows well that the agency's own design errors and hundreds of change orders meant to correct those errors have played a major role in delays. In fact, Bowman said, PennDOT knew in December of 2015 that the project would not be completed on time due to these errors.
Cherry Hill, Bowman said, has made every effort to mitigate the fallout of PennDOT's design errors, even offering up alternative solutions, which the agency rejected. Cherry Hill and its subcontractors are allegedly out hundreds of millions of dollars because PennDOT has not reimbursed them for extra work.
"Cherry Hill has not sought publicity to assign blame," Bowman said, "but Cherry Hill will not stand by in the midst of such unjustifiable and injurious accusations where Cherry Hill has suffered as a result of PennDOT's faulty design and project mismanagement."
Due to the coronavirus outbreak, PennDOT has since halted all highway work throughout the state.
Dive Brief:
- Pennsylvania state Sen. Kristin Phillips-Hill has questioned $24 million in claims for an Interstate 83 interchange project submitted by one of general contractor Tutor Perini's subsidiaries, characterizing the situation as "change-order scheming." The Mount Rose Avenue project is also approximately two years behind schedule, according to Phillips-Hill.
- “I’ve read countless articles and reports on the company where they go in on the low bid and then submit additional cost overruns with lengthy project delays," Phillips-Hill said during a state Senate Appropriations Committee budget hearing, referring to Tutor Perini's alleged business practices. Cherry Hill Construction reportedly got involved directly with the I-83 project in 2018, according to the York Dispatch.
- In addition to $24 million, the firm has requested a 598-day extension via a claim against PennDOT with the state's Board of Claims, alleging that the department's failure to take problems on the Mount Rose project seriously constitutes a breach of contract. The firm said it uncovered serious unexpected setbacks including water and debris that prevented it from completing its work. Cherry Hill is supposed to give PennDOT a revised schedule for completion this month, according to Yassmin Gramian, the Pennsylvania DOT's acting secretary.
Dive Insight:
The original Cherry Hill contract was for $53.8 million and is now more than $60 million. PennDOT has fined Cherry Hill $7 million in late fees.
Construction Dive contacted Tutor Perini for comments, but had not heard not heard back at the time of publication.
Phillips-Hill called the delays on the Mount Rose project embarrassing and said she fields more questions from her consitutuents about the delays than any other issue. Gramian said the project's problems keep her up at night and that Pennsylvania Gov. Tom Wolf also has expressed concern to her about the I-83 project.
In addition, Phillips-Hall raised the question of how lawmakers can "safeguard against future PennDOT bids going to entities that specialize in change-order scheming." The lawmaker also compared the Mount Rose project to another along I-83, which she said was on track to finish on time and possibly under budget. The work on that project, she said, is being performed by a local contractor.
Tutor Perini is known for its aggressive pursuit of change orders for both extra time and additional costs, which has resulted in disputes with owners and even litigation in many cases. On its Aug. 8, 2019, Q2 earnings conference call, CEO Ron Tutor emphasized that the company doesn't take these challenges lightly. "Our adversary should be aware of our record of litigation," he said. "Over the last 20 years, by our account and review, we have gone to trial 41 times," he said. "Some of the cases settled on the courthouse steps, but of the many others that actually litigated, we won all but two. These are the facts. As such, we remain confident that we will collect the moneys due us."
However, it's not unusual for a highway project to generate change orders, particularly when the contractor discovers unanticipated site conditions once construction begins, as Cherry Hill claims it did in its complaint against PennDOT. The contractor said that its crews hit water when PennDOT asked them to dig deeper in one section of the project and that it also encountered an unexpected debris landfill in the course of its work.
I-4 Mobility Partners, the development team working on the $2.3 billion Interstate 4 expansion in Orlando, has an outstanding claim in the amount of $100 million with the Florida DOT for additional schedule time and more money after subsurface geological conditions allegedly contributed to the failure of drilled shafts. I-4 Mobility Partners also claim that design elements increased the risk of failure.
While Tutor Perini has prevailed on projects like the California High-Speed Rail Authority's bullet train project in California and the San Francisco Municipal Transportation Agency's (SFMTA) Central Subway project, it has had some setbacks in court recently.
During its most recent earnings call covering the 2019's fourth quarter and full year, the company said that both periods were negatively impacted by an adverse jury verdict related to the Alaskan Way Viaduct Replacement project in Seattle to the tune of almost $124 million.
Earlier this week, the firm confirmed that a committee of its board of directors is engaged in discussions about its potential acquisition.
